Optimism, Entrepreneurs, and Prosperity

Stephen DeAngelis

February 10, 2010

This is the third post in a short series about entrepreneurism. The cynical journalist Ambrose Bierce (1842-1914) defined optimism as: “The doctrine, or belief, that everything is beautiful, including what is ugly, everything is good, especially the bad, and everything right is wrong. It is held with greatest tenacity by those most accustomed to the mischance of falling into adversity, and is most acceptably expounded with the grin that apes a smile. Being a blind faith, it is inaccessible to the light of disproof — an intellectual disorder, yielding to no treatment but death. It is hereditary, but fortunately not contagious.” [The Enlarged Devil’s Dictionary by Ambrose Bierce, compiled and edited by Ernest J. Hopkins, New York: Doubleday, 1967] The only point of agreement that I have with Bierce is that optimism, unfortunately, is not contagious. The world would probably be better if it were. I favor optimism over pessimism or skepticism.

 

I have written numerous posts in which I have asserted that entrepreneurs are naturally optimistic. I’ve even dedicated a couple of posts to the topic of optimism (see Optimism and Pessimism and In Praise of Optimism). The underlying message of these posts is that optimism is a competitive advantage in most circumstances. Michael Skapinker of the Financial Times agrees [“Positive thinking is still key to prosperity,” 18 January 2010]. He begins his piece with a bit of jab at his fellow Britons’ traditional stiff upper lip:

“Years ago, before I had my own video cassette recorder, let alone DVD player, the Financial Times used to have a cinema in the basement. If you had a video, you would go down, hand it to a projectionist who seemed to have been there since talkies began and snuggle down to watch. I once took down a video by the management guru Tom Peters. In the film, Mr Peters regaled his audience with tales of companies that had innovated, delighted customers and reinvented themselves. Voice rising, face glistening, he exhorted his audience to do it too, rousing them to a whooping, hands-aloft ovation. Our projectionist extracted the video from the machine and handed it back to me. ‘Goes on a bit, doesn’t he?’ he said. I relayed the remark to my colleagues. ‘Makes you proud to be British,’ one said. It is easy to laugh, but hasn’t America’s unembarrassed enthusiasm been responsible for its business dominance? Aren’t Microsoft, Apple and Google the result of people stilling all doubts to turn their ideas into world-leading companies?”

I’m not personally a big fan of corporate pep rallies where employees are expected to scream with excitement about a company’s offerings and future prospects. But I am a fan of positive thinking and optimistic dispositions. Skapinker reports that not everyone agrees with me:

“As Robert Reich, former US labor secretary, observed: ‘American optimism carries over into our economy, which is one reason why we’ve always been a nation of inventors and tinkerers, of innovators and experimenters.’ That sunniness has to be good for business, doesn’t it? No, says Barbara Ehrenreich, the US writer, in her book Smile or Die: How Positive Thinking Fooled America and the World. … She reminds us that business has not always been linked to optimism. Max Weber traced capitalism’s roots to Protestantism, which required hard work and deferred gratification. That changed with the rise of service businesses, which demanded constant growth in customer desires and employees who could meet them. Hence the need for the ever-present smile, the positive attitude and the corporate dislike of moaning. Ms Ehrenreich recounts the rise of the motivational speaker, the team-building exercises and the dismissal of staff for showing insufficient enthusiasm. This positive thinking contained the seeds of meltdown.”

Surely there is a difference between positive thinking (or a positive attitude) and forced smiles. True optimism comes from within. Forcing a natural pessimist to smile is like putting lipstick on a pig. It just doesn’t look right. But does that in anyway detract from the power of optimism? I don’t think so. Skapinker continues:

“Ms Ehrenreich advocates a ‘vigilant realism’, one that analyses dangers, rather than dismissing them as unimportant ‘compared with one’s internal state or attitude or mood’.

I don’t disagree with Ehrenreich on that point. Where I think she misses the boat is believing, like Bierce, that optimists share some fatal flaw that makes them perceive the world unrealistically. In one of my earlier posts, I wrote: “Although I am a big believer in optimism, I’m also a realist. I understand that there is a place for people who are willing to question company actions when they see a problem that optimists don’t.” On the other hand, optimists see opportunities that pessimists don’t. Successful entrepreneurs almost always build their businesses on sound business plans. I say “almost always” because serendipity does play an occasional role — such as being in the right place, at the right time, with the right idea. On the whole, a company is much better off if a large majority of its employees share an optimistic outlook. Skapinker concludes:

“Who does it better? For all of China’s power, it still does not have a single world-class innovative company. Yes, there are lessons to learn about evaluating risk. But you can be paralyzed by risk too. Any innovation is a leap of faith, a belief that the risk is worth running. Americans have been good at that. I wouldn’t count them out yet, or their positive thinking.”

A recent New York Times‘ article about Detroit provides some anecdotal evidence of optimism’s power [“Detroit Entrepreneurs Opt to Look Up,” by Susan Saulny, 10 January 2010]. Michigan, in general, and Detroit, specifically, have been hit hard by the current recession. One would expect to find little optimism in such circumstances. One, of course, would be wrong. Saulny writes about a number of young entrepreneurs who are looking optimistically to the future. She writes:

“With $6,000 and some Hollywood-style spunk, four friends opened this city’s only independent foreign movie house three months ago in an abandoned school auditorium on an unlighted stretch of the Cass Corridor near downtown. After the unlikely hoopla of an opening night, red-carpet-style event in an area known for drugs and prostitution, exactly four customers showed up to see a film. Since then, the Burton Theater has had a few profitable nights. But, the owners say, this adventure in entrepreneurship was never completely about making money. It was also about creating a more livable community. ‘Nobody could comprehend why we’d start a theater,’ said an investor, Nathan Faustyn, 25. ‘But when you live in Detroit, you ask, “What can I do for the city?” We needed this. And we had nothing to lose. When you’re at the bottom of the economic ladder, you have nowhere to look but up.’ Despite the recession — and in some cases because of it — small businesses are budding around Detroit in one of the more surprising twists of the downturn. Some new businesses like the Burton are scratching by. Others have already grown beyond the initial scope of their business plans, juggling hundreds of customers and expanding into new sites. Across from the Burton, for instance, Jennifer Willemsen just celebrated the first anniversary of her shop, Curl Up and Dye, a retro-themed hair salon serving 1,500 clients. Not far away, Torya Blanchard, a former French teacher, recently opened the second location of Good Girls Go to Paris, a creperie. Next door, Greg Lenhoff, also a former teacher, opened a bookstore in August called Leopold’s. And just down the street from Leopold’s, on Woodward Avenue, Victor Both runs Breezecab, a company he started with a severance package after a layoff from Wayne State University. He uses rickshaws to ferry workers and conventioneers around downtown.”

Will all of these ventures succeed? The honest answer is, no. But enough of them will succeed that they will help bolster Detroit’s deflated economy. Saulny continues:

“It is not an uncommon instinct to start an enterprise in bad times and seize on weakened competition, lower overhead costs and perhaps more free time. Nor is it limited to Detroit. But the trend is particularly striking here, in a city that was suffering long before the rest of the nation fell into recession and where hard times, business closings and abandonment became routine generations ago. Experts say the zeal for entrepreneurship these days in Detroit and elsewhere has precedent: according to research by Dane Stangler, a senior analyst at the Kauffman Foundation, a center for economic research in Kansas City, Mo., half the companies on the Fortune 500 list this year were founded in recession or bear markets. Further, Mr. Stangler said in an interview, company survival rates going back to 1977 show a negligible difference between companies founded in expansions and recessions.”

Allstate Insurance is one of the companies that began business during the Great Depression and it trumpets that fact in its advertising campaign throughout the current recession. Rather than stress the downside of the current recession, Allstate acknowledges that the recession is bad and then stresses what we should learn what we can about ourselves from it on the positive side. Allstate’s message is basically, “what doesn’t kill you makes you stronger.” Saulny continues:

“Michigan, which has the highest unemployment rate of any state, has been aggressive in offering support for start-up companies, particularly in Detroit. The Michigan Small Business and Technology Development Center, which offers support and counseling, counts 20 small businesses, and 400 new jobs, created last year in the three-county area around Detroit, and the center expects that tally to grow as it completes its accounting in the coming weeks. That was down from 41 new businesses in 2008, but on par with the 23 such start-ups in 2007 and 24 in 2006. At Wayne State University’s business incubator, TechTown, housed in a former auto plant, 150 companies jostle for space — up from one when the building opened five years ago. ‘I find it inspiring,’ Peter Bregman, the chief executive of Bregman Partners, a New York management consulting firm, said of what is happening in Detroit. ‘There’s something about that feeling — “Maybe America abandoned us, but we’re not going to abandon us.”‘ Analysts say the entrepreneurs have tapped into buyers’ penchants for spending locally in a bad economy, along with a longstanding void in the service industry. Some business owners are also capitalizing on a newly energized nostalgia for the vibrant Detroit that used to be, and the more general trend toward urban living.”

Saulny reports that one thing that Detroit has is lots of is empty spaces. Entrepreneurs are trying to work out deals with landlords to help bring Detroit back to vibrancy. “And some customers,” Saulny reports, “are going out of their way to support the new city businesses.” Optimism alone won’t save Detroit, or any other city devastated by the economic downturn; but optimism plus entrepreneurs are an important part of any formula that will spur prosperity in cities that appear to be dying.